Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Mazda Motor, Intel Corp, Zomato, Bangkok Bank Public, Netflix Inc, Plan B Media and more

In today’s briefing:

  • Conviction Call Mazda – 1Q and FY OP Beats Should Be Biggest in Sector
  • Figuring Out the Intel/GLOBALFOUNDRIES Deal
  • India Channel Insight | Zomato, AU Bank, Johnson Hitachi, Nilkamal, Makemytrip
  • Bangkok Bank – Rotten To The Core
  • Netflix 2Q21: Game On
  • PLANB: Expect Solid Recovery Period in Mid 4Q21
  • BBL: 2Q21 Result Was in Line with Our Expectation

Conviction Call Mazda – 1Q and FY OP Beats Should Be Biggest in Sector

By Mio Kato

Sell side consensus on Mazda is relatively muted as it is the third least favoured stock within the auto sector ahead of Mitsubishi Motors and Nissan, both of whom were loss making at the OP level last FY. In contrast we expect Mazda to have the strongest performance among the auto sector driven by results in North America and Australia and the impact of prior efforts to strengthen their underlying profit structure.

Figuring Out the Intel/GLOBALFOUNDRIES Deal

By Jim Handy

Intel’s rumored bid to acquire GOLBALFOUNDRIES is a good move to achieve the company’s current goals, but as this analyst has discussed in a prior Insight, those goals are very difficult to rationalize.

India Channel Insight | Zomato, AU Bank, Johnson Hitachi, Nilkamal, Makemytrip

By Pranav Bhavsar

This channel insight focuses on Zomato (ZOM IN), AU Small Finance Bank Limited (AUBANK IN),Hitachi Home & Life Solutions India Ltd (JCHAC IN), Nilkamal Ltd (NILK IN) and Makemytrip Ltd (MMYT US). States, where our channels were based, include- West Bengal, Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Bihar.  

About India Channel Insight

Our objective with India Channel Insight is to share snippets from our channel interactions that are part of our research process. These snippets emerging out of these interactions and have been aiding us to generate interesting trade ideas and have often proven to be reliable sources of qualitative alpha. 

Bangkok Bank – Rotten To The Core

By Thomas J. Monaco

*Weak Numerics: Bangkok Bank (BBL.TB) [BBL] reported 2Q21 bottom-line results of THB 6.4 bn, declining THB 566 mn (8.2%) on a linked quarter basis. Core operating results were far worse, however, coming in at THB 553 mn or down 86.2% over the same period; and

*Credit Risk Remains Elevated: We find that BBL’s annualized net new NPLs during the period are THB 4.2 bn or 8.3% annualized. Given the increase in net new NPLs, moratorium credits are unknown and remain a wild card, and that COVID-19 continues to wreak havoc, we find that while loss reserves are hefty, the aggressive push to build reserves and de minimis NCOs despite the consistently high NPLs may suggest a big clean-up is coming.

Netflix 2Q21: Game On

By Aaron Gabin

We have been longtime fans of Netflix the product and Netflix’s management team can rightfully be described as visionary. They had the vision to have the public markets fund an experiment in business models that appears now set to breakeven on FCF in 2021. We have said since last year that Netflix is a good relative short given the extreme pull-in of demand from COVID, but have turned bullish for the simple fact that Netflix’s stock performance tracks the pace of sub growth, and we see growth reaccelerating in the back half of 2021. The kicker for us is the potential for gaming to be leveraged as an ARPU lever…and an upward estimate revision cycle. We may be early….but the stock’s flattish AH reaction on a pretty mediocre quarter and weak guide reads bullish to us.  

Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.  

PLANB: Expect Solid Recovery Period in Mid 4Q21

By Research Group at Country Group Securities

We reiterate a BUY rating for PLANB with a target price of Bt7.70 derived from 45xPE’22E, its 5-year average trading range or 20% premium to Thai consumer discretionary sector. A premium reflect our expectation for faster earnings recovery after easing lockdown relative to peers in service sector.

• Expect the company to report net loss in 2Q21 at Bt53m, compared with Bt85m loss in 2Q20 and Bt37m profit in 1Q21. YoY improvement is due to low base of revenue in 2Q20 and revenue recognition from Olympics license. Meanwhile, QoQ worsening will be due to poor Ads spending by corporates amid the 3rd wave of COVID-19 widespread and recognition of fixed guarantee payment worth of Bt165m paid to MACO. (kick off 2Q21 onwards) 

• We anticipate 3Q21 net loss to reach bottom of this year due to impact from city lockdown while 4Q21 will be improving along with resuming overall media budget spending after vaccines are being widely distributed.

• We expect OOH media revenue in 1H22 to bounce back strongly from the bottom, a similar scenario we have seen in 2H20.

• Revise 2021E earnings down by 58%, but maintain 2022E forecast.

BBL: 2Q21 Result Was in Line with Our Expectation

By Research Group at Country Group Securities

BBL’s net profit in 2Q21 was Bt6.36 bn (+105%YoY, -8%QoQ), 5% better than our forecast with stable NPL at 3.7%.

• Pre-provision profit grew 1.6%YoY and 16%QoQ to Bt17.5bn backed QoQ growth by growing Non-NII. Net interest income was Bt 20.0bn (+10.6%YoY, +1.6%QoQ) ,in line with our forecast supported by loan growth (+2.2%YTD).
• Meanwhile, Non-NII dropped 2.6%YoY but grew 23.7%QoQ to Bt13.7bn , driven QOQ by higher dividend income and better gain from portfolio investment. However, net fees and service income declined 6%QoQ due to lower fee income from mutual funds and bancassurance services.
• We expect earnings momentum to remain mute HoH in 2H21 given possible rising provision in reaction to prolong pandemic, but to grow strongly YoY due to low base. However, current share price at 0.4xPBV’21E is quite cheap. Together with its secured loan portfolio, any downside should be limited.
We reiterate our BUY rating with a target price at Bt155, derived from 0.65x PBV’21E,which is close to its 3-year average.

Related tickers: Mazda Motor (7261.T), Intel Corp (INTC.O), Bangkok Bank Public (BBL.BK), Netflix Inc (NFLX.O), Plan B Media (PLANB.BK), Bangkok Bank Public (BBL.BK)

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